Global commodity markets are experiencing unprecedented volatility, with crude oil and industrial metals reaching multi-year highs due to geopolitical tensions and transport bottlenecks. Additionally, domestic labor shortages in key sectors have emboldened trade unions to demand substantial wage increases to match the rising cost of living. As a result, manufacturing firms face sharply escalating unit costs of production.
Unable to absorb these rising expenses through productivity gains, firms are passing these costs onto consumers in the form of higher retail prices. This phenomenon of cost-push inflation (line 7) poses a severe challenge for monetary policymakers, as raising interest rates to curb price rises risks choking off economic growth during a period of supply-side weakness.
Define the term 'cost-push inflation' as used in Extract C (line 7).
327 exam-style questions on AQA A Level Economics 2.3 Economic performance, covering 2.3.1 Economic growth and the economic cycle, 2.3.2 Employment and unemployment, 2.3.3 Inflation and deflation, and 2.3.4 Possible conflicts between macroeconomic policy objectives. Each one has a worked solution and a mark scheme showing where the marks go.